Pensions - freedom, choice and danger | Drawdown schem...

Drawdown schemes will be an option for everyone

A drawdown scheme should allow you to keep your funds invested in a pension scheme and to draw funds out flexibly during your retirement. On death un-drawn funds can be left to your dependants.

Up until now drawdown has been subject to complex rules, not offered directly by most DC schemes and, because of high charges, usually restricted to those with large pension pots. This position is changing and with drawdown being greatly simplified its availability will increase rapidly and charges will fall. However, because of the short notice given of the new flexibilities schemes are still being developed and so availability in April 2016 may be limited.

In April many members will be in schemes which do not offer a drawdown facility. There is a danger that, in the absence of a drawdown facility, members will opt to draw out their funds in one go, and incur tax penalties, if they do not want to buy an annuity. Members wishing to access drawdown will need to consider transferring their pension rights to another scheme, which offers this facility.

Unite representatives may wish to make representations to schemes suggesting that they should arrange for a drawdown facility to be made available as an option to members, either within the scheme or via the identification of an outside provider.

Members wishing to access drawdown are advised to access guidance and financial advice to help identify the best providers of this type of scheme, given the way the market is still developing. A particular issue to clarify and take account of is the level of charges on these products.

Where members do enter drawdown arrangements in respect of all or part of their retirement pot they can, at a later age, consider annuity purchase to close off their exposure to investment and mortality risks.

One early offer in the drawdown market is the Crystal Drawdown Scheme being offered by Blue Sky Pensions. This gives an indication of the sort of facility that drawdown schemes will be able to provide. You can get an overview of the product by visiting their website http://www.crystaldrawdown.uk (Blue Sky Pensions is run by a not for profit company of which Unite appoints half of the board directors and which sponsors a pension scheme for which Unite appoints half of the trustees).